Indian IT Industry on Hiring Spree

Revival of the global economy and an expected 8.3 percent GDP growth in India is good news for the business process outsourcing industry. The IT -IT eS segment is set to hire more this year. The year 2010 will be a good year for the industry.

Many IT -IT eS companies are on a hiring spree. According to Nasscom, the projected net hiring in the IT /BPO sector will touch 150,000 during the financial year 2011.

Infosys Technologies, one of the IT leaders, is planning to hire 30,000 employees during the current financial year to add its existing headcount of 113,796. During the last financial year, Infosys hired around 27,000 employees while the plan at the beginning of the year was to hire 18,000 employees. As part of the expansion, Infosys has made 19,000 campus offers for the year.

(With a hit rate of 75-80 percent, about 15,000 freshers are expected to join). At Infosys, the lateral recruits would total 6,000. The company plans to add about 2,000 employees overseas in places like China, Philippines, Mexico and the U.S. Infosys will be hiring across verticals.

The BPO arm will hire about 7,000. Nandita Gurjar, senior VP and group head, Human Resources at Infosys told Asia Pacific Business and Technology Report, “We have a guidance to recruit 30,000 in FY’11 as a part of our business expansion plans. We have already made 19,000 campus offers and we expect 15,000 freshers to join us, going by a hit rate of 80 percent. We will be recruiting 6,000 laterals and 7,000 for the BPO . We are also adding 2,000 employees overseas in places like China, Manila, Mexico and the U.S.”

Infosys Technologies recently forecast revenue growth of 16-18 percent for 2010-11, slightly higher than market estimates. The forecast was primarily based on robust outsourcing demand. Infosys had also announced wage hike for its employees. The company feels that it can afford this, since it would largely come from the bottom of the pyramid. Many leading BPO s are looking to hire people from rural areas. There is also a push to increase their presence in rural areas.

Convergys recently announced that it will be hiring more than 1,000 employees in Gurgaon, India in the next three months. There is a growing interest in technical support and troubleshooting work.

“Based on new and existing clients’ sustained demand for the same, our hiring forecast has doubled on tech profiles over the last couple of years. We also have new business from telecommunications and financial services clients and new Convergys employees will provide a wide range of voice-based support to the clients’ customers,” Ashutosh Sinha, director of Recruitment for Convergys’ Customer Management operations in India, told Asia Pacific Business and Technology Report.

Research conducted by Convergys found that customers place knowledgeable service representatives and issue resolution at the top of their wish list when it comes to customer service.

“To support Convergys’ ability to deliver the results customers want, my recruitment team focuses on hiring people with superior voice quality and a keen interest in helping others. Employees then go through a robust training program that enables them to resolve customer issues quickly and with empathy. In addition to comprehensive training, Convergys offers employees a positive work environment, competitive wages, and benefits including tuition reimbursement,” Sinha added.

“We do anticipate further hiring needs in our other locations throughout the year. Interested applicants in India can simply text the letters “CVG” to 57 57 54 from a mobile phone to get a personal call from a recruiter. They can also learn about job openings at Convergys in India by following our Twitter page @cvgindia, which also showcases the latest Convergys commercials and “A Day Inside Convergys.” Interested candidates may also submit their résumés to hrindia@convergys. com or visit one of our many recruitment offices in the New Delhi area,” he added.

Mumbai-based Patni Computers is planning to increase its headcount by 2,500- 3,000 employees in 2010 and the normal ratio of engineering to non-engineering graduates is 2:1. The company expects the highest hiring upswing in the areas of IMS , BPO and application development.

Mahindra Satyam, the fourth largest software services company, has recently said it is planning to hire 4,000 associates this quarter. At present it has a headcount of 25,000. Satyam had a headcount of 53,000 in January last year when its founder and chairman B Ramalinga Raju confessed to a 7,800 rupee accounting fraud.

Aricent, a provider of communications technology and services, plans to hire 3,000 employees globally.

“Just as with 2009-2010, where we hired a total of 3,000 new employees globally, we expect to hire another 3,000 employees globally in 2010-11 and will maintain our 60/40 lateral/fresher ratio. This is almost a 40 percent growth for us as our current global strength stands at 8,500. Out of these, we would be hiring 1,000 people in India alone, over the next 3 months,” Aricent spokesperson said in an interview.

India’s largest IT firm, Tata Consultancy Services, and its subsidiaries are planning to hire 38,000. HCL Technologies is planning to hire 5,000 freshers in 2010, compared with the 2,000 it hired in calendar year 2009.

The driving forces

The IT services industry will resume growth in 2010. The growth will be led by the commercial sector due to a number of factors, according to Fitch.

The main factors that could influence growth include improvement in the global economic outlook and a resurgence in business confidence among key sectors, demand in core markets, declining contract restructurings and client losses from bankruptcies or M&A and increasing interest in transformational and discretionary consulting and systems integration projects that were delayed during the recession.

During the recession, the BPO industry faced less business from the financial and banking industry. Many IT eS companies based in India rely on the growth of the financial and banking industry, which will grow in 2010. According to Fitch, strength in the commercial IT services market will be partially offset by weakness in the public market primarily attributable to budgetary constraints in developed countries.

John M. Witt, director, Fitch Ratings, says that the consistency of government IT spending could be undermined by the implementation of cost containment measures necessary to moderate worldwide government spending amid ballooning debt borrowings.

According to a survey by global consultancy PricewaterhouseCoopers and Duke University’s Offshoring Research Network, the economic crisis of 2009 reemphasized the importance of cost saving and efficiency improvement as top strategic reasons for outsourcing, followed by access to qualified personnel.

Curbing Unhealthy HR Practices

More hiring means more unhealthy practices for the industry. The $60 billion IT -BPO industry, which directly employs more than 2.3 million people, is facing the music from the Nasscom. Nasscom, the key industry association for IT and IT eS companies, wants to curb wrong HR practices.

The growing attrition rate, which is a major concern for the industry, and the increase in the growth force the BPO segment to look for poaching through referral programs.

ITeS companies are opting for wrong practices to meet short term demand of employees, as they bag projects. This leads to exit of entire teams from other companies working on important projects. This can affect the profitability of the projects in the long run as poachers end up paying more for new people.

Chaired by Infosys chairman NR Narayana Murthy, the Nasscom committee on Ethics and Corporate Governance recommended IT -BPO companies ask for relieving letters from new employees. The Nasscom action plan, which is in place, includes.

• no to poaching
• get relieving letter
• serve entire notice period

The industry body has also advised IT -BPO companies to approach prospective employees with unbiased means like advertisements in newspapers, websites, radio or television.

Nasscom’s Ethics and Corporate Governance committee formed after the Satyam debacle has members like Genpact president and CEO Pramod Bhasin, Mastek board member Ashank Desai, Zensar CEO Ganesh Natarajan, ex CVC chairman N Vittal and S Ramadorai, vice-chairman at TCS.

The interesting fact is that BPO employees do not have a single platform to share their concerns.

Nasscom also advised companies to follow a whistleblower policy and appoint an ombudsman for addressing the ethics concerns. The scope of whistle blowing should extend to external relations such as customers, partners, competitors, vendors, other external agencies, and society.

Nasscom is also coming down heavily on employees who are misusing their opportunities. It is noticed that some of the employees opt for part-time private work while simultaneously working with large IT -BPO companies. This is leading to less employment opportunities for freshers. According to Nasscom, an employee should not accept a position of responsibility in any other company without specific sanction.

Hurdles on Growth Curve

The country’s power situation is worsening day by day. For instance, Gurgaon in the Delhi NCR region, one of the BPO hubs in the country, faces power cuts for more than 4 hours a day.

Almost 45 percent of companies in the IT sector produce their own power, which is an additional cost. Their focus on green IT is yet to give considerable gains. The IT eS industry is expecting big investments in infrastructure from the government to support the growth of the segment.

The domestic BPO is competing with several emerging countries. Investment in infrastructure to support the growth of the IT eS industry should be the top priority for the Union government. Infrastructure and power are the basic issues, said a top official with a leading BPO in Delhi.

There is a sharp growth in the number of small companies. They are looking for incentives from government. Small companies that cannot afford SEZ s should be given tax benefits.

Commuting to Gurgaon from Delhi and Noida areas is a big challenge for the employees. Increasing in fuel prices are forcing employers to rethink transportation currently given to their employees. Availability of public transportation in Gurgaon may force some of the companies to suspend company-offered transport facilities.

Country Competition

Main competition is not among companies which are based in India, but with those in emerging countries. If other countries are planning to start offering IT services at competitive rates, India can lose its edge.

There are new countries which are emerging in IT services. They are posing a threat to the dominance of Indian and North American companies. These emerging nations are offering people with similar skill sets, while cost is comparable to those of dominant nations.

Outsourcing companies in North America and India, which have long dominated the industry, are being challenged by competition from Latin America, Eastern Europe and Asia in service areas such as contact centers, business process outsourcing, and information technology outsourcing, according to a recent survey by global consultancy PricewaterhouseCoopers and Duke University’s Offshoring Research Network.

As per the survey, the outsourcing industry is transforming due to the emergence of new providers around the world and efforts of existing outsourcers to expand into new markets.

Though India remains the outsourcing market leader, other emerging economies are seeking to expand in the sector. “Growing competition has transformed the outsourcing industry into a global race for market share. India’s success as the world’s back office has motivated other developing countries with well educated and under-employed populations to seek to duplicate their experience,” Charles Aird, managing director, PricewaterhouseCoopers, said.

However, only 16 per cent of Indian service providers see competitors from other emerging economies as a threat, the survey added.

These new nations are charting new strategies to capture market share. To capture market share, the Chinese government has designated 20 cities as outsourcing hubs in an effort to attract more international investment. The Philippines, which is emerging as a strong competitor to India, has declared outsourcing a priority industry. In fact, several Indian companies have BPO centers in the Philippines.

According to the survey, 62 percent of service providers said they plan to expand the scale of their existing offerings. Moreover, the number of service providers planning to offer new finance and accounting, human resources and innovation services more than doubled from the previous year.

Moreover, unrealistic client expectations and the lack of an outsourcing strategy for them were the top reasons for contract terminations. “Near-shoring” has gained momentum among companies using or considering outsourcing services.

In line with the industry growth, the IT eS sector will gain growth. It is time to support them through more incentives and additional protection to its employees.